This post was originally featured on the White Collar Forensic blog.
While crises have the potential to inflict serious harm on organizations, it is often a company’s response to a crisis that ultimately is more impactful to long-term corporate reputation and value. If handled well, a crisis enables leadership to demonstrate their mettle, sincerity, and good character to investors, customers, employees, and the public. If handled poorly, crises can irreparably damage corporate credibility, stakeholder trust, and share price. Companies should prepare for crises in advance, which includes having at the ready a team of experts – legal, compliance, investigative, forensic, and crisis communications – to ensure proper strategy and communications through these “make or break” situations.
Securities fraud, corruption, criminal prosecutions, search warrants, executive misconduct, cyber-attacks, data loss, trade secret theft, consumer frauds, and mass torts are examples of these “make or break” scenarios that tend to play out publicly. It is important to recognize that these are not just legal problems. Treating them as such is both risky and short-sighted. In these situations, companies will be engaged with their employees, management, boards of directors, customers, investors, regulators, litigants, and the public. Developing a cohesive legal, investigation, compliance and communications strategy requires a thorough understanding of the facts and specialized knowledge of the legal and regulatory issues at stake.
Effective crisis communication
The most effective crisis communication strategies begin with a compelling set of core messaging that is consistent with the facts, transparent and credible. This core narrative is fundamental to message discipline, which helps ensure that a company doesn’t inadvertently disclose sensitive or privileged information, contradict existing disclosures in a way that causes confusion and inconsistency, or otherwise undermine the overall legal and business strategy. Message discipline also means designating a spokesperson or spokespersons through whom communications will pass, providing for consistency and reining in the risk of a communication misstep.
Effective response also requires organizational collaboration, discipline, and the ability to anticipate the next stages of the crisis. And it must be sustainable – that is, designed to apply to future communications across all stakeholder groups.
Getting ready
If you are intimidated by this long list of “must-dos” when navigating a crisis, fear not – preparedness can make all the difference. While a company cannot anticipate and plan for every crisis scenario it may face, corporate leadership teams can and should develop a crisis plan that is tailored to their unique business and risk profiles. Crisis plans identify the most likely crisis scenarios and provide company executives, communications, and other functional key team members with comprehensive procedures and tools that enable quick and decisive action when navigating a crisis, irrespective of the specific details. These plans typically define and systematize the following elements:
- Designating and activating crisis response teams. Form internal and external teams who have specialized skills to handle different situations, and define their lines of authority and accountability. Crisis response is a multi-player, cross-functional undertaking, and assembling the response team for the first time during an actual crisis is an ineffective crisis management strategy.
- Assessing the situation and gathering facts. When a crisis emerges, convene the crisis team and gather as many facts as possible. Act quickly and carefully to assess the severity and scope of the situation.
- Developing key messages. Build strategies for internal and external communications and get a head start by drafting core messaging that applies to any scenario and can quickly be deployed to reinforce the company’s values and commitment to its stakeholders, as well as instill confidence that the company has the crisis situation under control.
- Testing and practicing. Conduct regular tabletop exercises, which are simulations of real-life crisis situations designed to test a company’s ability to mount an effective response. These exercises help companies identify and understand what areas of their crisis preparedness are working and what areas need more attention.
Getting set – when there is no imminent public disclosure
Companies often have little control over the timing and nature of the disclosure(s) that catalyze crises. In some cases, an issue will be exposed via a leak, a burst of activity on social media, or some other unexpected means. In other cases, companies proactively report on a situation to get out ahead of it. Sometimes, they are legally required to disclose matters, like material cybersecurity incidents or certain transactions, regulatory probes, and litigation. No matter the situation, crises by their nature are dynamic and require constant monitoring and adaptability.
When a crisis materializes, legal, compliance, investigative, and communications teams have different mandates, but they must remain aligned. Lawyers and investigators take the lead on fact finding, witness interviews, issue spotting, protection of legal privileges, and developing legal theories and defenses. Communications teams must be in lockstep with the legal strategy as it develops while simultaneously identifying critical stakeholder groups and creating credible, compelling, and accurate statements and talking points that support the common goal of protecting the company from both legal and reputational harm.
If there is no urgent circumstance driving a decision to disclose, companies and their crisis teams should take time to advance the investigation and uncover as many relevant facts as possible. Legal and investigative teams will work together to locate relevant documents and interview key witnesses. The company may have been alerted to the issue under investigation by a whistleblower or other alleger, in which case, the legal team will want to verify and corroborate the information provided and take steps to protect the alleger’s identity.
If a company has prepared in advance for the eventuality of a crisis by mapping and organizing its institutional data and identifying subject matter experts in key areas of the company’s operations – when a crisis does occur – the legal team will be better able to pinpoint and access relevant information and understand and substantiate the issues at stake. Compliance teams should be kept informed of key findings so they can assess company internal controls, identify potential compliance shortcomings and begin developing a remediation plan. Throughout this time, the legal and compliance teams will also be keeping management, and in some cases the company’s board of directors, updated on its progress and findings and will stand ready to advise and align on issues like whether any public disclosures should be made or whether the matter under investigation should be reported to the authorities.
Go – the crisis is public!
Once a crisis is in the public domain, pressure on a company mounts and the stress around these initial disclosures and the demand for information can be punishing. More than ever before, stakeholders demand substantive and accurate information quickly. Consumers, customers, the media, and shareholders increasingly hold companies accountable for their culture, transparency, and social responsibility, raising the bar on what, when, and how to communicate.
When stakeholders first learn about a consequential event, they will want to hear from the company quickly: 1) what happened, 2) what the harm is, 3) what the company plans to do about it, and 4) how the company plans to ensure the issues do not recur.
Costly mistakes are frequently made in the earliest stages of crisis response when companies are pressured to respond and provide details about a situation while it is unfolding. If communications are necessary while an investigation is still underway and critical information remains unknown, there are still ways to communicate transparently and effectively through a holding statement. An effective holding statement typically involves openly acknowledging the situation, demonstrating empathy for those impacted, and outlining the actions the company has taken and plans to take in the future.
A poorly worded public comment, evasive or disingenuous response, or the perception that a crisis is being ignored or mishandled can severely damage a company’s credibility and undermine its legal strategy. To avoid these costly missteps, companies and their response teams should consider the following:
- Never get ahead of the facts and do not minimize or hide the facts
- Don’t make promises that can’t or won’t be kept
- Never say anything publicly that could damage credibility – whether it’s because there could be evidence that contradicts the statement, or because the company may have to change its position in the future
It’s easier to build on a statement later than to dial it back, and it’s ok to say things like: we’re looking into these allegations; we feel deeply for the individuals impacted; we are taking this situation very seriously; we are devoting all resources necessary to find out what happened and ensure it doesn’t happen again; and, we will give updates as we are able. It is important, however, not to make a hard commitment in an initial statement as to whether, how and when the company will report back, as the facts are still unfolding, and it is not possible to determine what roadblocks may lay ahead.
Some matters do require a company to provide updates in real time. In that case, don’t speak in terms of certainties unless the facts are known and unassailable. Often, as investigations unfold, facts that appeared troublesome at the start, once digested and put into context, may prove less consequential, especially as the evidentiary record is developed. Also, be wary that real-time disclosures of facts can derail an ongoing investigation.
The same rules apply if a company discloses it is under investigation by a government, regulator, or agency. Sharing that the company is cooperating fully with the authorities can still engender trust and convey that the company is being transparent, without disclosing details the company cannot share for legal or other reasons. Whether justified or not, the public often equates a blanket “no comment” with guilt or evasiveness. Behaving in a way and saying things that show respect, self-awareness, sincerity, and responsibility will put a company in better stead with stakeholders and create goodwill and credibility.
Conclusion
Conducting high profile investigations and preparing for crisis communications are distinct but complementary professional disciplines with teams that often work in tandem and assist a company during a crisis. The time to start building a team of internal and external experts is long before a crisis strikes. A company should identify key enterprise risks and think through the kinds of serious events that could occur and impact the organization in advance. It should map out how it plans to undertake an investigation, make disclosures, and communicate to its stakeholders along the way. All these steps will position the organization to respond confidently and avoid communications missteps that make the mishandling of the crisis – and not the crisis itself – the main story.
